Delaware Judge Finds Elusive MAC—Does It Change Anything?

Purchasers of businesses often want an "escape hatch" prior to closing if the target business suffers a "material adverse change" (or a "material adverse effect"). Historically, based on court decisions primarily out of the U.S. (and Delaware in particular), this right has been viewed as extremely difficult to exercise in practice. As reported by Reuters, last week's decision of a Delaware judge affirms a purchaser's ability to walk if a true "material adverse change" occurs with respect to a target business.

"Material Adverse Change" Condition Validly Exercised

In a significant opinion issued on October 1, 2018 by Vice Chancellor Travis Laster of the Delaware Chancery Court (Akorn, Inc., v. Fresenius Kabi AG Case No. 2018-0300-JTL), it was ruled that a purchaser could walk away from an acquisition due to factors which were found to constitute a "material adverse change" ("MAC"). This decision is of particular importance as it represents the first time a Delaware